Tax Tips for Uber Driver Partners

H&R Block - Uber Partnership
The team at H&R Block Australia have put together this fact sheet to help Australian Uber driver-partners understand their income tax obligations.


Income Tax

You must lodge a tax return every year. This will need to include income generated using the Uber app, plus any other income you have earned from other sources during the tax year. You can also claim all your deductions through your income tax return. These will reduce your taxable income.

Completing a tax return can be a complex and time consuming process. If you get it wrong, you may be liable to penalties and interest if you underpay tax. Conversely, you need to ensure that you claim everything you’re entitled to. The easiest way to meet this obligation is to get a tax agent to complete your return for you.

The tax year end finishes on 30 June and you normally have until 31 October to send in your tax return. However, tax agents are able to lodge returns much later than this without penalty, potentially as late as May of the following year.

If you are in, or expect to be in, a position where you are due to get a tax refund, it pays to get your return in early.

In many cases, you will be obliged to pay income tax in instalments during the course of the year. This is generally the case if you have assessable income of at least $2,000. The ATO will normally work out your initial instalments based on your prior year assessment and updated instalments will then be calculated quarterly at the end of September, December, March and June.


Record-keeping

Maintaining records is important for filing a tax return.

Remember, if you don’t have documentation to support your position if the ATO asks you questions, you could find yourself stuck with an additional tax bill, plus penalties and interest.

So, what records should you keep?

Income and sales records

Copies of all your weekly Uber payment statements breaking down: gross fares plus tolls less Uber service fee plus any incentives.

Expense or purchase records

  • Records of all your business expenses such as fuel, servicing and repairs including cash purchases. Records could include receipts, invoices, credit card vouchers and diaries to record small cash expenses.
  • If you purchased something which is partly used for private use and partly for business use, you’ll need to keep a record showing how you worked out any private use for that item. For example, if you purchase a mobile phone which costs $500 (exclusive of GST) and is used 90% in the business and 10% privately, you can only claim a tax deduction on $450 (being 90% of the costs).
  • Look out for H&R Block’s e-Log Book (coming soon) to help you record all these expenses accurately.

Year-end records

  • These include lists of people that you owe money to (creditors) and lists of people who owe you money (debtors).
  • You’ll also need worksheets to calculate the decreasing value of your assets (of which your car might be the main one). These are called ‘depreciating assets’. This calculation can be complex and you might be best to get your accountant to prepare this for you.

Bank records

  • Documents you receive from the bank such as bank and credit card statements and loan documents.

Goods and services tax (GST) records

  • The main GST records you need to keep are tax invoices from your suppliers. You need a tax invoice to claim GST credits.

Allow time each week to keep your records up-to-date. This helps when it’s time to do your tax as all the information is already there and you’re not overwhelmed with paperwork. This frees up time to focus on making money, instead of doing paperwork.


You may want to make use of one of the various apps on the market (such as the H&R Block Australia tax app) which enable you to record expenses as you go.

You must keep your records for at least five years, either in paper form or electronically. As paper invoices and receipts tend to fade, we recommend electronic copies.


Deductions

You can claim a deduction from your taxable income for all expenses which you incur as part of earning your income as an Uber driver-partner. This is the case whether or not you have an ABN. You can only claim costs which relate to your business. If any expenses are partly private, they can only be claimed proportionately. If they are wholly private, they can’t be claimed at all.

Amongst the typical deductions you may be able to claim are the following:

  • Any service fee or other fees you pay to Uber
  • Fuel for your car
  • Vehicle licensing and registration
  • Mobile phone bills
  • Costs of cleaning, servicing or repairing your vehicle
  • Insurance
  • Accountant/tax agent fees
  • Bank fees

You may also be entitled to claim depreciation of your vehicle as an expense.

Claiming Car Travel

If you use your car for work you are entitled to claim the expenses that relate to the business costs of using your car to do your job. From FY15/16, there are a two methods you can use to claim the car expenses. You must own the car to claim under any of these methods and the record keeping requirement is detailed for each method.

Method 1 – Cents per kilometre

  • Your claim is based on a set rate for each business kilometre you travel and you can claim a maximum of 5,000 kilometres per year under this method. If you travel more than 5,000 kilometres the claim must be limited to 5,000 kilometres or you need to use an alternative method of claim.
  • The claim is worked out by multiplying the total business kilometres travelled (limited to 5,000) by the number of cents allowed (66 cents/km for 2015/16). This figure takes into account all the vehicle running expenses (including depreciation. The rates are adjusted each year.
  • You do not need written evidence but you need to be able to demonstrate that you have incurred the expense. Diary records will suffice.
  • The rates are adjusted each year. Note, from 1 July 2015, there will be a flat rate per business kilometre of 66 cents. This will apply irrespective of engine size.

Rates per business kilometre: 2013–14

Ordinary engine Rotary engine Cents per kilometre
1.6 litre (1,600cc) or less 0.801–1.3 litre (801–1,300cc) 65 cents
1.601–2.6 litre (1,601–2,600cc) 0.8 litre (800cc) or less 76 cents
2.601 litre (2,601cc) and over 1.301 litre (1,301cc) and over 77 cents

Method 2 – Logbook

  • Your claim is based on the business use percentage of each car expense, which is determined by a log book that must have been kept for a minimum 12 week period. This log book must be updated every 5 years.
  • You logbook must have the odometer readings for the start and end of the period plus the total number of business km travelled. This will establish your “percentage of business use”.
  • You can claim all expenses that relate to the operation of the car, at your percentage of business use, as established from your logbook.
  • You will need to keep all receipts throughout the year to justify your claim – insurance, servicing, repairs. Petrol can be estimated using the start and end odometer readings for the year, to indicate total kilometres travelled.
  • Depreciation is calculated as 25% of the written down value of the car (using Diminishing Value method).

Tax Calculation Example (Using the Logbook Method)^

Income
Gross Fares 20,000
Incentives/misc payments 1,000
Total Income 21,000
Deductions
Uber Service Fee 4,000
Toll 1,000
Fuel ($5,000, 25% business use) 1,250
Maintenance ($1,600, 25% business use) 400
Registration / Insurance ($2,000, 25% business use) 500
Total Deductions 7,150
Taxable Income 13,850

^ Note these figures are for illustrative purposes only.


Further Information

Small Business Asset Write-Off

Between 12 May 2015 and 30 June 2017, small businesses are able to claim an immediate tax deduction for all assets acquired for use in the business up to a value of $20,000. This could include anything from computer equipment to a motor car, a coffee machine for the office kitchen to solar panels for the office roof. The deduction isn’t a one-off; all qualifying purchases through to 30 June 2017 will count, up to an aggregate maximum of $20,000.

In order to get the most out of the tax break, and to avoid getting into trouble with the ATO, here are some tips on the small business asset write-off:

  • For Uber driver-partners, the most tempting to asset to purchase using this tax break is a new vehicle. Assets which cost more than $20,000 do not qualify for the immediate tax break. These assets must be written-off over their effective lives. You may be able to get a second hand vehicle for less than $20,000, in which case, you can access the tax break since second hand assets are included. If the car itself doesn’t qualify, you may be able to purchase extra bits of kit for the car, or alternatively equipment to enable you to maintain the vehicle. Items of computer equipment for an office are also likely to be popular.
  • The $20,000 threshold is GST exclusive, so if you see items quoted at GST inclusive prices, you can actually buy an asset priced at up to $22,000 (ie, $20,000 plus GST). Be cautious when acquiring assets which are close to the threshold. In particular, don’t forget those extra costs which you might have to incur to get an asset into a state where it can be used in the business, like installation costs. If you spend $19,500 on an asset but have to spend another $1,000 on installing the asset to make it useable, you won’t qualify.
  • Don’t let the generosity of the tax break override your commercial instincts. This tax break is ideal if you were planning to purchase assets anyway or have a real business need to invest. But remember, there’s no such thing as free money. You have to outlay cold, hard cash in order to get the tax element back so make sure any capital purchases fit with your overall business plan. If you’re not sure whether now is a good time to make a purchase or indeed whether to make a purchase at all, have a chat to your accountant who will be able to quantify the advantages and disadvantages for you.
  • Beware of private use. To claim the full deduction, the asset has to be used wholly in your business. If there’s an element of personal use, you can still claim the deduction but it needs to be pro-rated to reflect the element of personal use. So, if you spend $10,000 on an asset which is used 50% privately, you can only claim a deduction for $5,000.
  • And finally, given the potential for this tax break to be abused in any number of ways, expect the ATO to rigorously check claims for this deduction.

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